Question

Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a low-volurme (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI . Both products require 1.5 hours of drect labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,558,906. Thus, the predetermined overhead rate is $16.19 or $1,558,906 ÷ 96,300 per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows. Expected Use of Drivers by Product Expected Use of Cost Drivers Activity Cost Pools Receiving Forming Assembling Testing Painting Packing and shipping Cost Drivers Pounds Machine hours Number of parts Number of tests Gallons Pounds Estimated Overhead Commercial 120,000 8,000 52,000 10,000 1,578 120,000 Home $80,400 157,500 390,600 56,100 36,806 837,500 $1,558,906 335,000 15,000 35,000 27,000 217,000 165,000 25,500 15,500 3,680 335,000 215,000 5,258

Answer 1